Economic crisis: Scotland sees ‘worrying’ rise in businesses facing advanced distress

In releasing its latest Red Flag Alert data, business rescue and recovery specialist Begbies Traynor said Scottish businesses saw a steeper rise in advanced distress levels than the rest of the UK in the second quarter of 2022. .

According to the figures, the number of Scottish businesses facing more advanced ‘critical’ distress (which refers to businesses that have financial problems such as decrees of more than £5,000 lodged against them) has jumped by 132% compared to in the same quarter of 2021, while the UK as a whole saw a 37% increase on the same period the previous year.

The latest report also revealed a 71% increase in this type of advanced distress in the country during the second quarter of 2022 compared to the previous quarter. By contrast, there was only a 3% rise across the UK as a whole, quarter-on-quarter.

In terms of ‘significant’ or early-stage distress (which refers to businesses that have been subject to orders under £5,000), Scotland has seen a similar picture to the UK.

In the three months from April to June 2022, the country saw this type of distress drop by 13% from the same period a year earlier, while the UK-wide figure was down by 11%. However, Scottish businesses performed better quarter on quarter, recording a 1% drop in what is considered significant distress, while the UK saw no change.

Looking at how Scottish business sectors were hit by early distress in the last quarter compared to the first three months of the year, those who performed the worst were food and pharmaceutical retailers, up 6%; printing and packaging, with a 5 percent increase; and Food & Beverages and Industrials, both up 2%.

On the other hand, the sectors that have seen significant declines since the previous quarter are financial services (down 6%); bars and restaurants, utilities, and health and education (all down 4 percent); and construction, hotels and accommodation, and telecommunications (down 2 percent).

Ken Pattullo, Managing Partner of Begbies Traynor in Scotland.

Ken Pattullo, Managing Partner of Begbies Traynor in Scotland, said: ‘It is worrying to see cases of ‘critical’ distress in Scotland already rising almost four times the UK-wide figure in the second quarter of 2022. compared to the previous year, and also increased sharply quarter on quarter.

“While early-stage distress levels here are closer to those in the UK and have seen a slight decline, many economists fear the worst is yet to come. Unfortunately, the UK economy continues to be affected by the uncertainty surrounding Brexit, as well as steadily rising energy costs as well as supply chain issues as China suffers further shutdowns of Covid. We warn Scottish businesses to be prepared for a rocky road. »

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